When I was working, I always worried at the end of the year that how will I save my tax and how will I convert it into my savings? And for this, I always had to depend on others’ advice. But you don’t need to depend on others, because here I am going to tell you some options to save 80C tax, knowing which you can decide for yourself how and where to use your earned money. So, let’s see these options one by one!
What is 80C Deductions and why is it important?
When I was working, I was in a hurry to save tax every year before the end of the FY (Financial Year). And that is why I used to find out which schemes are good for me. 80C is an important section of the Income Tax Act 1961, under which salaried employees get a deduction of up to Rs 1.5 lakh from their taxable income. You can invest this money in various savings and investment schemes, which reduces your tax and also saves money for the future. But keep in mind that this is only applicable for the old tax regime, it is not available in the new tax regime. Let’s now know which investment options you can use to avail 80C!
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Best options to save tax under 80C
I have used these schemes myself and benefited from them. You can also choose these options as per your needs. Let’s see in detail:
- PPF (Public Provident Fund): PPF is a safe and long-term investment scheme. You can deposit Rs 1.5 lakh every year, and it currently earns 7.1% interest. This scheme is for 15 years, but you can extend it by 5-5 years. Its interest and maturity amount are tax-free, which is why this scheme is very popular. I invested in it in my initial job and got good returns.
- ELSS (Equity Linked Savings Scheme): ELSS is a type of mutual fund that invests in the stock market. It has a lock-in period of 3 years, but it can give good returns (about 10-15% per annum). I invested a little in it because I wanted to take a risk and grow my money quickly. It offers tax deduction up to 1.5 lakhs under Section 80C.
- NSC (National Savings Certificate): NSC is a fixed-term option offered by the post office. You can invest up to 1.5 lakhs for 5 years, and it currently offers an interest rate of 7.7%. The interest on it is taxable, but the principal amount is deductible under 80C. I invested a small amount in it because it is less risky.
- FD (Fixed Deposit): You can avail the benefits of 80C by investing in a 5-year tax-saving FD. It gives 6-7% interest, but the interest is taxed. I used this option when I wanted a safe investment. You can open an FD by going to the bank or online.
- Sukanya Samriddhi Yojana (SSY): If your daughter is below 10 years, then SSY is a good option. You can invest up to Rs 1.5 lakh per year in it, and currently it gives 8.2% interest. This scheme is for 21 years, and the amount earned from it is tax-free. I had invested in it for my daughter’s future.
- Life Insurance Premium: You get tax deduction up to Rs 1.5 lakh on your or your family member’s life insurance premium. I took health and life insurance for my husband, and saved tax on it. But check the credibility of the company while buying insurance.
- EPF (Employees’ Provident Fund): If you have an EPF in your job, then the money deducted from your salary (approximately 12%) and the company’s share are eligible for deduction under 80C. I took advantage of this in my job, and saved money for retirement.
- Education and tuition fees: Your children’s school or college fees are eligible for deduction under 80C, but the limit is 1.5 lakhs. I took this deduction for my children’s school fees.
- Home loan principal: If you have taken a home loan, you get tax deduction up to 1.5 lakhs on the principal amount in your EMI. I took advantage of this for my first house.
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How to avail 80C Deductions? – Step by step guide
Follow some easy steps to avail 80C:
- Step 1: Decide your budget
See how much money you have to invest. Invest only up to 1.5 lakhs, as you will not get tax deduction for more than that. - Step 2: Choose a plan
Choose a plan according to your needs – EPF/NPS for retirement, SSY for children’s education, or ELSS if you want to take risks. - Step 3: Invest
For PPF/SSY/NSC, go to a post office or bank.
For ELSS/FD, use a bank app or mutual fund app (e.g. Groww).
For life insurance, contact the insurance company. - Step 4: Keep receipts
Keep the investment receipt or statement. This information will be required while filing ITR (Income Tax Return). - Step 5: Complete before March 31
To get tax exemption for FY25, invest by March 31, 2025.
Some important things you should remember
- Invest on time: Do not invest on the last day (March 31), as there may be problems with the bank or online system.
- Understand the risks: While ELSS has risks, PPF and NSC are safe. Check your risk tolerance.
- Keep documents ready: Keep all receipts and statements handy for ITR filing.
- Get additional deductions: Under Section 80D, you get a tax deduction of Rs 25,000 (Rs 50,000 for seniors) on health insurance premium. Don’t forget to take advantage of this.
- Get professional advice: If you have any doubts, talk to a Chartered Accountant (CA) or a financial advisor and get guidance.
When I was working, saving and saving tax was a challenge for me. But the 80C schemes gave me both profit and security. You too can save your tax and save money for the future using these schemes. So what are you waiting for? Start planning your money today! If you have any more questions, be sure to ask me. I will explain it to you in simple terms!
FAQ:
1. What is 80C deduction for salaried employees?
Section 80C allows salaried employees to claim up to ₹1.5 lakh tax deduction by investing in schemes like PPF, ELSS, or paying life insurance premiums under the old tax regime.
2. Which investments qualify for 80C deductions?
PPF, ELSS, NSC, 5-year FD, SSY, life insurance premiums, EPF, education fees, and home loan principal repayment qualify for 80C deductions up to ₹1.5 lakh.
3. How can I maximize my 80C deductions for FY25?
Invest in a mix of PPF, ELSS, and EPF, pay insurance premiums, or use home loan principal by March 31, 2025, and keep receipts for ITR filing.
4. Can I claim 80C benefits in the new tax regime?
No, 80C deductions are not available in the new tax regime; they apply only to the old tax regime for salaried employees.
5. What’s the last date to invest for 80C benefits in FY25?
The last date to invest for FY25 80C deductions is March 31, 2025, to claim tax savings in your income tax return.